A Deep Dive Into The December Retail Sales Numbers That Are Making Investors Queasy

Things cooled down a bit in December after a torrid start in November, but the numbers for the two-month period still make for the best holiday shopping season since 2006.

Same-store rose by just more than 3.0 percent year-over-year-below expectations that same-store sales could rise by about 3.5 percent for the month.

The number was slightly higher than last year's gain of about 2.9 percent.

Overall, same-store sales for November and December combined rose by about 4.0 percent, the best year-over-year growth since 2006.

Many retailers actually missed analysts' expectations for the month, which had been heightened after November's gaudy numbers.

There was a suspicion that November numbers were partially driven by consumers conducting some or all of their holiday shopping earlier than usual. There was the usual Black Friday madness, but many retailers started promotions and discounting even before that. As a result, November possibly accounted for a larger share of the overall holiday shopping season than what we've become accustomed to. The strong month may very well have been a sign that consumption patterns were shifting, not necessarily that consumers were going to spend as robustly for the entire season.

Going forward, expectations are that retail sales will continue to be choppy. Shoppers may have gone out for the holidays, but the high unemployment rate and other factors mean that consumers remain challenged.

According to Kantar Retail, sales-weighted same-store sales increased 3.2 percent in December for the 31 retailers that reported numbers. (A pdf with each retailer's results can be downloaded here.)

Frank Badillo, senior economist at Retail Forward, said in a statement, "It's clear that November's great in-store deals robbed spending from December. And in December shoppers were partial to spending online, perhaps encouraged even more by bad weather late in the month. One key exception was upscale department stores, which saw sales growth hold steady or improve in December."

In addition, Kantar Retail's ShopperScape survey showed that December sales numbers were also affected by "preliminary indications that shoppers favored online retailers over store-focused retailers during the holiday."

Retail Metrics, meanwhile, reported that same-store sales increased 3.2 percent compared with a prediction for a 3.5 percent gain. Retail Metrics' combined November December Holiday Sales were 4.1 percent, which marks the best holiday comps since 2006 for our Index.

According to Retail Metrics, most retailers are now issuing earnings guidance to the down side with American Eagle, Macy's, Wet Seal, The Gap, Cato, and Bebe all issuing ranges below consensus.

The picture is also a bit rocky going forward since the year-over-year comparisons "become increasingly difficult in the next three months - January 3.3 percent, February 4.1 percent, March 8.7 percent (Easter impact)".

Lastly, blog Retail Sails' tally showed that the 30 retailers the site tracks posted same-store sales gains of 3.2 percent and total sales of $54.7 billion. For the holiday season as a whole, Retail Sails put the total sales figure at $91.6 billion and same-store sales gains at 4.1 percent for the November/December period.